The Trade That Never Was

by john on January 17, 2004

I didn’t do much stock trading in 2003, for the most part letting my stocks run. And run they have. I was a little disappointed to notice that a couple of positions I exited early in the year for a small gain went on to post over 200% returns, but those were not stocks I had a long term interest in and so I’m able to shrug that off.

I suppose it’s easier when you have a history of this, in particular The Trade That Never Was.

In 1998 my broker, E*Trade, was holding lotteries for people wanting to get in on IPO shares. If you got lucky and your number was picked you would be given the opportunity to buy 100 shares at the IPO price of the selected stock. On September 23, 1998 I was notified by E*Trade that I would be given the opportunity to buy 100 shares EBAY, which was set to IPO the next day.

Now this put me in a bit of a quandary. Because while I really liked EBAY, I needed to have the cash for the shares in my account, which would turn out to be $1,800 ($18/share offering was set). At that time I didn’t have any available cash in my account as I was fully invested and as I looked at my portfolio at the time there was nothing I saw that I was willing to sell as I thought each of them had great potential.

So I never took E*Trade up on the offer.

When it closed up 160% at about $47 you can imagine how stupid I felt. As it went down almost back to the initial offering price over the next month, however, I felt vindication that I hadn’t fallen for another IPO scam.

And now here we are in 2004 and the split adjusted price for those EBAY shares I never took is $1.50 and with the stock currently trading at around $67 that makes a 4366% increase. The $1,800 I never spent would now be worth $80,000 if I had held on all this way. And despite being a big EBAY fan I’ve never owned the stock except for in our investment club, where we have a nice 140% gain in it.

I’ve a similar one with a shorter time frame. At the beginning of Gulf War II: The Sequel, I saw the opportunity to buy E*Trade itself for $2.95 a share. I never executed on the trade because I was a big chicken. Had I bought it, I would have made approximately $10/share if I sold today. It wasn’t a company on the skids, it was just a jittery market and I didn’t grow the cajones and pull the trigger. Woulda shoulda coulda.

Ah, well that is one I’ve actually done pretty well on. Bought from 30 all the way down to 2.99, sold about a third of my holding at 11 but still have a nice chunk now at 14. I really liked E*Trade once they added E*Trade Bank as it smooths out their business model. But woulda coulda shoulda I shoulda bought a lot more at 3 because I knew that was overreaction. You’ll go crazy playing the what-if game!